1. The Fisher equation tells us that the real interest rate approximately equals the nominal rate minus the inflation rate. Suppose the inflation rate increases from 3% to 5%. Does the Fisher equation imply that this increase will result in a fall in the real rate of interest? Explain. 2. You've just stumbled on a new dataset that enables you to compute historical rates of return on US. stocks all the way back to 1880 . What are the advantages and disadvantages in using these data to belp estimale the expected rate af return on U.S, stocks over the coming year? 3. You are considering two alternative two-year imvestments: You can invest in a risky asset with a positive risk premium and returns in each of the two years that will be identically distributed and 1. The Fisher equation tells us that the real interest rate approximately equals the nominal rate minus the inflation rate. Suppose the inflation rate increases from 3% to 5%. Does the Fisher equation imply that this increase will result in a fall in the real rate of interest? Explain. 2. You've just stumbled on a new dataset that enables you to compute historical rates of return on US. stocks all the way back to 1880 . What are the advantages and disadvantages in using these data to belp estimale the expected rate af return on U.S, stocks over the coming year? 3. You are considering two alternative two-year imvestments: You can invest in a risky asset with a positive risk premium and returns in each of the two years that will be identically distributed and